TeraPlast reported consolidated turnover of 672 million RON, down 5 percent in 2023

TeraPlast Group announced its financial results for 2023, saying that they ‘bear the imprint of a macroeconomic environment filled with challenges’.

For the whole year 2023, EBITDA stands at RON 51.3 million, a 3 percent decrease versus 2022, mainly due to the decrease in the Compounds segment. EBITDA margin, Group level, slightly increased to 7.6 percent, while for the Installations segment remains in the double-digit range.

The Group’s gross margin increased from 32 percent to 37 percent, representing a 10 percent increase in absolute terms.

The consolidated turnover contracted with 5 percent in 2023, to RON 672 million, under the influence of the decrease in the Compounds segment. Exports reached 16 percent of the turnover and the Group’s products reached 22 European markets. In terms of quantities, total volumes are close to the 2022 levels – 75,346 tonnes in 2023 versus 76,931 tonnes in 2022 (-2 percent yoy). The quantities sold in the second half of the year, especially the 27 percent increase in volumes in Q4 2023 vs. Q4 2022 show positive market dynamics, well above that of 2022.

The net result of 2023 remained in positive range of RON 1.1 million despite business seasonality of the last quarter of the year. The Installations segment generated a net profit of RON 17.3 million. Two divisions had a net loss, Windows (RON 1.9 million lei) and Packaging (RON 15.7 million lei).

“These results reflect the challenging economic context, with a decrease of demand for some of our markets, which led to us directing our efforts to preserving volumes, market shares and margins. We had to undergo a different environment than the one we anticipated in the beginning of 2023, especially with regards to a slower pace of infrastructure works and residential renovations, as well as a weak demand for Compounds.” Stated Ioana Birta, CFO of TeraPlast Group.

“2023 was a full year in terms of events and business expansion. We commissioned a major investment, the stretch film factory, and concluded the negotiations for the acquisition of Palplast and Freiler Group. These M&A operations brought one off costs which amounted to RON 1.2 million. We embark on 2024 strengthened by these acquisitions and with excellent perspectives on Western European markets” added Birta.

Installations segment, the largest and best performing in the Group had positive results even though the growth was moderate compared to the previous years, under the influence of deflation brought about by a sharp decrease in raw material prices. This activity profited from the increase in public works, which accelerated sharply in the second part of last year. EBITDA margin of the Installations segment stood at over 10 percent while the net profit of RON 17.3 million covered the negative results of other business lines.

Compounds segment had a sharp contraction of the turnover (-40 percent) because of sales decrease of its customers. Despite this contraction, which affected its whole market, TeraPlast remains the main supplier for its customers in this market. Due to an increase in costs, EBITDA dropped to RON 6 million (-51 percent vs 2022), but EBITDA margin was above the average, at 7.9 percent. On the other hand, this division had a positive contribution of RON 1.6 million to the net profit.

The Windows segment suffered as a result of decrease in orders from the retail segment, which had a 40 percent contraction of sales volumes. To counterbalance this effect, the Group’s strategy, since 2023 and for 2024 is to focus on the domestic renovations and new buildings market in order to reduce the dependence on DIY stores. Non-DIY sales reached 28 percent of the sales in the previous year. This market segment has a higher margin, reflected in an increase from 39 percent to 44 percent of the sales (2022 vs 2023) of the gross margin. This increase however, failed to be fully felt in the EBITDA which stood at RON 0.4 million as the segment faced sharp cost increases. The average salary increased in this division by 46 percent versus 2022, mostly due to the increase in minimum wage in the construction and related sectors.

The packaging segment was the only one with a negative EBITDA in the Group, but the activity improved throughout the year, which gives good perspectives for 2024. This segment reached optimum volumes of orders in the last months, an essential step towards being profitable. In the next stage, the focus will be to increase profitability, which means discontinuing production on inefficient lines in Nasaud. TeraBio Pack went through an adjustment of headcount for the new market conditions.

For this year, TeraPlast Group presents a budget with moderated organic growth. The slightly conservative approach results from past years’ experience in which, the premises from the start of the year materialised only in part throughout the year. The macroeconomic context imposes such an approach, with expectations that several market segments will face contractions on various levels while public works, with governmental or European financing will be on the upswing. Main expenses, as percentage of the turnover, will be in line with last year. In order for this to happen, the Group planned for several optimisations and fixed costs reduction in segments that underperformed in 2023. Additionally, at the consolidated level, a preservation of business lines’ weight in revenues is forecasted.

As a whole, the turnover as well as the EBITDA will increase consistently. The M&A operations conducted within the Installations segment will make a significant contribution, while the new stretch film business will drive revenue growth in the Packaging segment.

For the Installation segment, domestic infrastructure projects are expected to grow in 2024 as well.

Sales volumes for the current activity of the Group are forecasted to grow by 16 percent to 80 thousand tonnes. These will be topped by the sales volumes of the newly acquired subsidiaries. Thus, for the whole year, TeraPlast Group will reach sales volumes of 100 thousand tonnes, amounting to 33 percent increase in sales volumes compared to 2023.

TeraGlass will continue the strategy of 2023 to switch to non-DIY customers. This switch will be boosted by the newly recruited, experienced sales team, focused on the renovations and new buildings market.

For the Packaging segment, radical transformations are to be expected in 2024. The turnover will grow by 80 percent due to the commissioning of Opal (stretch film). TeraBio Pack will reach break-even this year, however as a whole, the Packaging segment will generate a loss, as until Opal reaches critical mass, it will have a negative impact on the EBITDA.